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Financial Dictionary - Increasing repayments
Increasing repayments
A mortgage with increasing repayments is one where the repayments increase progressively, at a percentage agreed by the customer and the bank. Although repaying the mortgage is cheaper at first, the payments increase over time.
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This system is suitable for people who expect their purchasing power to increase over the years, or who expect to make partial repayments in the early years. If the increasing repayments are fixed rate, the repayments are known from the outset, so the customer knows by how much their monthly payment will increase.
Forecasting monthly repayments is more difficult if the repayments are variable rate. In both cases, increasing repayment mortgages are always more expensive than constant repayment mortgages using the usual French system.